Wednesday, April 14, 2010

Economics of Television Syndication

The economics of television syndication is based on deficit financing. I bet you thought that the government was the only one who used deficit financing. This is the way it works. Someone gets an idea for a TV show. The do a creative brief and them try and pitch their ideas to the network executives. If a network buys their idea, the network provides most, but not all, of the money to develop of the idea. In other words, the network foots most of the bill to create the pilot. In exchange for their contribution, the network gets exclusive rights to air the program for a specific number of episodes. When that time period has expired, the production company is free to sell the show to anyone who is interested in airing it. That selling is called syndication. In fact, production companies have to sell the airing rights to get back the part of the production cost they paid as well as to make a profit. That is how deficit financing fits into the economics of television syndication.

What do you think happens to the economics of television syndication if there is no market for future airings? Huh, you say, why wouldn�t there be a market? After all we are still watching 50 year old reruns. That may be true for dramas, sit coms and even game, variety and talk shows. But what about reality shows and other programs that depend on the drama and suspense of the viewer not knowing who wins or who survives? Unfortunately, most of these reality shows cost as much as the traditional scripted show to produce.

Another problem is that with so many channels available, most shows are rerun so often that viewers quickly lose interest. After all, no matter how much you like a program, how many times are you willing to watch the same episode? I�m a big Law & Order fan. With over 300 episodes, they can run a different episode every day without repeating any of them. Even so, I�m beginning to lose interest in watching because I remember too much of the program from the last time I watched it. When you add DVD sales, the deficit economics of television syndication is causing the market value for each individual show to decrease.

For all of these reasons, the deficit economics of television syndication is under attack throughout the TV industry. If a solution is not found, there may not be constant new programs for us to watch. That could result in the entire industry collapsing. Even if that possibility is remote, it is a serious enough concern to get the best minds in the entertainment industry working on developing a new model for the economics of television syndication.

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